Assembly Biosciences, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Assembly is a clinical-stage biotechnology company developing oral therapies for chronic hepatitis B (HBV); it had no approved products and no product sales. Amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Collaboration revenue | $0 | $4.1 million; down 100% |
| Research and development expense | $18.6 million | $23.0 million; down 19% |
| General and administrative expense | $8.7 million | $8.7 million; essentially flat |
| Operating loss | $27.3 million | $27.7 million |
| Net loss | $27.2 million | $26.7 million |
| Net loss per share | $0.69 | $0.76 |
| Net cash used in operating activities | $33.3 million | $25.2 million |
- Cash and cash equivalents were $78.3 million and marketable securities were $136.6 million at quarter-end, totaling $214.9 million, versus $216.4 million at December 31, 2020.
- Total assets were $278.9 million; total liabilities were $31.7 million; stockholders’ equity was $247.2 million. Current assets of $221.6 million substantially exceeded current liabilities of $14.5 million.
- No conventional borrowings are reported. Operating lease liabilities totaled $8.6 million, including $2.9 million current. The filing reports no off-balance-sheet arrangements.
- Operating margin and product gross margin are not meaningful because the company had no product sales. Cash flow from investing activities was $18.0 million, primarily reflecting net maturities and sales of marketable securities; financing provided $34.1 million from ATM share sales.
Material changes versus the prior comparable period
- Revenue fell to zero after AbbVie terminated the Allergan collaboration in 2020; Q1 2020 included $4.1 million of collaboration revenue.
- R&D expense declined mainly because the Microbiome program was wound down, including reversals of previously recognized stock-based compensation. HBV program expense rose $3.7 million, reflecting increased clinical and manufacturing activities and staffing.
- Net loss increased by $0.5 million despite lower operating expenses, in part because interest and other income fell to $0.1 million from $1.0 million. Loss per share improved as weighted-average shares increased.
- Operating cash use rose by $8.1 million year over year. The company raised $34.1 million net through its at-the-market offering, issuing approximately 6.0 million shares; shares outstanding increased from 34.0 million at year-end to 40.1 million at March 31.
Outlook, management commentary, risks and unusual items
- Management stated that available cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months after issuance of the interim financial statements. The company nevertheless expects substantial future losses and will need additional financing; no external funding source is committed. Further equity financing could dilute shareholders.
- Management shifted Vebicorvir (VBR) strategy away from global registrational studies as chronic suppressive therapy toward combination regimens intended to achieve finite treatment or cure. In the VBR extension study, 39 of 41 patients relapsed after stopping therapy; the company concluded VBR plus an NRTI alone was insufficient for cure. Study 205 was terminated in Q1 2021.
- Two VBR triple-combination studies began in Q1 2021: one with Arbutus’s AB-729 and an NRTI, and one with pegylated interferon and an NRTI. Assembly recognized a $0.5 million reduction in R&D expense under the Arbutus cost-sharing arrangement.
- ABI-H2158 was in a Phase 2 study, with interim data expected in the second half of 2021. ABI-H3733 completed a Phase 1a study; preliminary data indicated general tolerability and favorable pharmacokinetics. Management anticipated identifying a fourth core-inhibitor candidate in the first half of 2021.
- BeiGene’s agreement covers development and commercialization rights in China and related territories. The $40 million upfront payment was received in 2020; up to approximately $500 million in milestones and tiered royalties are potential, contingent payments—not assured revenue. At March 31, $9.0 million remained deferred pending specified technology-transfer obligations or termination.
- Q1 included a $3.6 million reversal of stock-based compensation for forfeited awards, contributing to a net $0.3 million stock-based compensation credit. A $1.6 million loss was recorded on disposal of equipment associated with the Microbiome wind-down. The company expected its $1.2 million accrued restructuring liability to be paid in 2021.
- COVID-19 had not significantly interrupted operations or studies to date, though short enrollment delays, shipping/PPE constraints and potential future trial, vendor, supply-chain and regulatory delays remained risks. Other material risks include clinical safety or efficacy failures, dependence on collaborators and contract manufacturers, inability to raise capital, and regulatory and intellectual-property uncertainty. No material legal proceedings were reported.
Most important facts for investors to verify
- Whether ABI-H2158 Phase 2 interim results and subsequent clinical milestones meet the stated timelines and support continued development.
- Final and follow-up VBR Study 211 data, including relapse, safety and resistance findings, and whether combination trials show evidence relevant to finite treatment.
- Actual cash burn and remaining runway relative to the stated 12-month funding expectation, including the timing and terms of any future financing.
- BeiGene collaboration progress, remaining deferred revenue recognition conditions, and whether any milestones become sufficiently certain to recognize.
- Actual impact of the Microbiome wind-down, restructuring payments and share issuance on ongoing costs and shareholder dilution.